Telefonica and billionaire John Malone's Liberty Global are exploring a combination of their UK operations, people with knowledge of the matter said.
The companies are discussing a potential deal to bring together Telefonica's O2 mobile unit and Liberty Global's Virgin Media business, according to the people, who asked not to be identified because the information is private. If they reach an agreement, a transaction could be announced as soon as next week, the people said.
Telefonica is scheduled to announce its first-quarter earnings on May 7. No final decisions have been made, and talks could still fall apart or be delayed, the people said.
A representative for Telefonica declined to comment. A spokesperson for Liberty Global couldn't immediately be reached for comment.